If you wish to work as a contractor in Nicaragua, not only is the permit process more complicated but there can be a lot of tax paperwork every time your employer changes. An umbrella company acts as your permanent employer regardless of who you are doing work for, meaning that your official employer remains constant.
Paying taxes
With an umbrella company, you submit your timesheets directly to them and they will calculate the amount of tax you owe and pay it for you, giving you a net wage.
Work permits
Employers in Nicaragua will probably only want to sponsor you for the duration of your contract with them, making life extremely difficult for expat contractors.
One of the biggest benefits of umbrella companies is that they act as your permanent employer, and are therefore able to sponsor expat contractors for as long as they like.